Monday, October 21, 2013

Iran Pakistan Pipline - Pakistan seeking China to finance IP Pipline

As a Chinese company has distanced itself from the Iran-Pakistan (IP) gas pipeline, Pakistan is now looking to Russian energy giant Gazprom for providing necessary financing for more than a billion-rupee project.

“Russia may be the best choice for financing and constructing the pipeline,” an official said. Pakistan was willing to accept Gazprom’s offer to build its side of the pipeline, which would cost about $1.5 billion, he added. Gazprom wants its subsidiaries to engage in the project.“Russia may be the best choice for financing and constructing the pipeline,” an official said. Pakistan was willing to accept Gazprom’s offer to build its side of the pipeline, which would cost about $1.5 billion, he added. Gazprom wants its subsidiaries to engage in the project.

Though Pakistan has placed a request before the Iranian government for providing all financing for the construction of the pipeline on its side of the border, government officials believe it will be difficult for Tehran to make a commitment.

“The issue of Gazprom participation in the IP pipeline will feature in a meeting of the Pakistan-Russia joint working group next month,” the official said, pointing out Islamabad and Tehran had been going through the power transition process because of which progress on the project had slowed down.

Pakistan and Iran have to sort out technical issues to pave the way for the award of engineering, procurement and construction (EPC) contract to Iranian firm Tadbir Energy. An agreement in this regard has already been inked and will be formally signed after technical issues are addressed.

The two countries have finalised a $500 million loan deal and a high-level meeting between them is expected to be held soon to discuss the possibility of Iran providing all investment required for the pipeline. Petroleum and Natural Resources Minister, Shahid Khaqan Abbasi, is likely to lead Pakistan’s side in the talks.

A Chinese company, which had offered $500 million for the pipeline, pulled out after Pakistan refused to extend the validity of its bid.

After inviting bids from interested companies, Inter State Gas Systems, a state-owned Chinese company that handles energy import projects, had selected Panyn Chu King Steel Limited of China as a qualified bidder, which would provide pipes at the rate of $1,650 per ton including compressors. The company sought extension in the bid validity period, but the government turned down the request.

“As the Chinese company is no more interested in the venture, the government is now banking on Iran and Russia to fund the laying of gas pipeline in Pakistan,” a source said.

Iran has already committed to providing $500 million to finance the pipeline, but now the government wants Tehran to increase the credit line. Against the financing, Pakistan will award EPC contract to Iran-designated firm Tadbir Energy.

Under the project, Pakistan will import 750 million cubic feet of gas per day (mmcfd), which can be increased to one billion cubic feet. Of the quantity, the Government of Balochistan seeks 250 mmcfd for consumption at the Gwadar Port, therefore, the central government is expected to go for enhanced supplies from Iran to cater to the needs of the province.